Byte Back, Inc. Financial Statements. June 30, 2015 and 2014

Transcription

1 Financial Statements

2 Table of Contents Independent Auditor s Report Financial Statements Statements of Financial Position 1 Statements of Activities 2-3 Statements of Functional Expenses 4-5 Statements of Cash Flows

3 Certified Public Accountants Independent Auditor's Report To the Board of Directors Byte Back, Inc. We have audited the accompanying financial statements of Byte Back, Inc. (a nonprofit corporation), which comprise the statements of financial position as of, and the related statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, financial statements referred to above present fairly, in all material respects, the financial position of Byte Back, Inc. as of, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Alexandria, Virginia December 15, Shawnee Road, Suite 250 Alexandria, Virginia PHONE: Fax: Web: Members American Institute of Certified Public Accountants, Private Companies Practice Section and Virginia Society of Certified Accountants

4 Statements of Financial Position June 30, Assets Current assets Cash and cash equivalents 3 $ 342,755 $ 397,267 Grants and contracts receivable 5 447, ,221 Pledges receivable, net of long term portion 4 31,514 38,338 Prepaid expenses 7,963 7, , ,170 Property and equipment Land 23,345 23,345 Property and equipment, net 6 272, , , ,088 Other assets Deposits 7,475 6,975 Pledges receivable, long term portion 4 117, ,869 Total assets $ 1,250,231 $ 1,136,102 Liabilities and net assets Current liabilities Accounts payable and accrued expenses $ 123,828 $ 62,428 Mortgage loan payable, current portion 9 20,668 17, ,496 80,123 Mortgage loan payable, noncurrent portion 9 149, ,190 Total liabilities 293, ,313 Net assets Unrestricted, board designated reserve fund , ,007 Unrestricted, other 476, ,746 Temporarily restricted 8 226, , , ,789 Total liabilities and net assets $ 1,250,231 $ 1,136,102 The accompanying independent auditor's report and notes are an integral part of the financial statements. 1

5 Statements of Activities for the years ended (summarized) 2015 Temporarily Unrestricted restricted Total 2014 Support and revenue Contributions and grants Individual contributions $ 125,228 $ - $ 125,228 $ 80,764 Corporate and foundation grants 354, , , ,101 Government grants 116,644 25, , ,916 Other 2,775-2, Government contract revenue Computer classes 1,134,794-1,134,794 1,190,900 Program-related sales and fees 19,399-19,399 13,920 Donations from special event, net of expenses ($10,806) ,525 23,814 53,554 Investment and interest income 2,430-2, ,756, ,350 1,972,797 1,981,422 In-kind contributions 7 Donated services - at fair value 345, , ,980 Donated materials - at fair value 18,074-18, , , , ,916 Net assets released from restrictions 8 249,891 (249,891) - - Total support and revenue 2,369,819 (33,541) 2,336,278 2,454,338 Expenses Program services 1,803,726-1,803,726 1,801,760 General and administrative 326, , ,931 Fundraising 135, , ,809 Total expenses 2,265,366-2,265,366 2,166,500 Change in net assets 104,453 (33,541) 70, ,838 Net assets, beginning of year 625, , , ,951 Net assets, end of year $ 730,206 $ 226,495 $ 956,701 $ 885,789 The accompanying independent auditor's report and notes are an integral part of the financial statements. 2

6 Statement of Activities for the year ended June 30, 2014 Temporarily Unrestricted restricted Total Support and revenue Contributions and grants Individual contributions $ 80,764 $ - $ 80,764 Corporate and foundation grants 364, , ,101 Government grants 132, ,916 Other Government contract revenue Computer classes 1,190,900-1,190,900 Program-related sales and fees 13,920-13,920 Donations from special event, net of expenses ($14,874) 17,125 36,429 53,554 Investment and interest income ,800, ,929 1,981,422 In-kind contributions 7 Donated services - at fair value 371, ,980 Donated materials - at fair value 100, , , ,916 Net assets released from restrictions 8 180,155 (180,155) - Total support and revenue 2,453, ,454,338 Expenses Program services 1,801,760-1,801,760 General and administrative 250, ,931 Fundraising 113, ,809 Total expenses 2,166,500-2,166,500 Change in net assets 287, ,838 Net assets, beginning of year 338, , ,951 Net assets, end of year $ 625,753 $ 260,036 $ 885,789 The accompanying independent auditor's report and notes are an integral part of the financial statements. 3

7 Statement of Functional Expenses for the year ended June 30, 2015 Program services General and administrative Fundraising Total Personnel costs $ 704,382 $ 172,681 $ 66,839 $ 943,902 Payroll taxes 64,609 15,172 5,646 85,427 Employee benefits 62,925 13,918 5,521 82,364 Occupancy and utilities 123,949 5, ,794 Maintenance and repairs 17,680 1, ,749 Professional services 128,473 59,509 27, ,877 Professional development 4, ,948 Evaluation costs 7,751 1, ,237 Student events 11, ,855 Depreciation 44,057 5,122 1,084 50,263 Equipment and repairs Insurance 11,580 5, ,171 Telephone and internet 24,693 3, ,705 Supplies 69,017 1, ,530 Meetings 5,680 5,649 1,057 12,386 Postage and shipping 28 1,584 1,997 3,609 Printing and copying 17,500 2,375 1,115 20,990 Marketing 10, ,287 24,459 Transportation 8, ,457 Dues and memberships 315 1,778 2,623 4,716 Books, subscriptions, and references 1, ,760 Americorp stipends and training 129, ,423 Volunteer costs 11, ,708 Bad debt expense - (4,588) 175 (4,413) Loss on disposal of asset 9, ,500 Fees and other - 6, ,693 Total operating expenses 1,469, , ,808 1,901,885 In-kind expenses Donated services - at fair value 315,814 26,947 2, ,407 Donated materials - at fair value 18, , ,888 26,947 2, ,481 Total expenses $ 1,803,726 $ 326,186 $ 135,454 $ 2,265,366 The accompanying independent auditor's report and notes are an integral part of the financial statements. 4

8 Statement of Functional Expenses for the year ended June 30, 2014 Program services General and administrative Fundraising Total Personnel costs $ 568,765 $ 147,170 $ 50,735 $ 766,670 Payroll taxes 50,771 21,446 3,827 76,044 Employee benefits 67,563 5,208 5,508 78,279 Occupancy and utilities 106,313 7, ,283 Maintenance and repairs 14, ,996 Professional services 85,970 39,072 24, ,498 Student certifications 39, ,037 Depreciation 40,843 1, ,209 Equipment and repairs 20, ,932 Insurance 9,985 3, ,559 Telephone and internet 20,711 3, ,446 Supplies 40,539 2, ,025 Meetings 7,858 1,726 2,865 12,449 Postage and shipping 482 1,423 2,586 4,491 Printing and copying 17,575 1,010 5,811 24,396 Marketing 18, ,596 20,246 Staff development and travel 51,228 2,369 12,477 66,074 Dues and subscriptions 3,209 2,043 1,070 6,322 Americorp stipends and training 171, ,834 Allowance for uncollectible pledges - 4,834-4,834 Fees and other - 5, ,300 Total operating expenses 1,336, , ,615 1,700,924 In-kind expenses Donated services - at fair value 371, ,980 Donated materials - at fair value 93, , , ,576 Total expenses $ 1,801,760 $ 250,931 $ 113,809 $ 2,166,500 The accompanying independent auditor's report and notes are an integral part of the financial statements. 5

9 Statements of Cash Flows for the years ended June 30, Cash flows from operating activities Change in net assets $ 70,912 $ 287,838 Adjustments to reconcile change in net assets to net cash provided by operating activities- Depreciation 50,263 42,209 Loss on disposal of equipment 9,500 - Donated equipment - (7,340) Donated investments (19,955) - Unrealized (gain) loss on investments (1,065) 951 (Increase) decrease in operating assets Grants and contracts receivable (168,283) (49,993) Pledges receivable (net) 16,664 11,430 Prepaid expenses (619) (624) Deposits (500) (3,500) Increase in operating liabilities Accounts payable and accrued expenses 61,400 14,385 Net cash provided by operating activities 18, ,356 Cash flows from investing activities Sales of investments 21,020 40,224 Purchase of property and equipment (75,666) (18,400) Net cash provided (used) by investing activities (54,646) 21,824 Cash flows from financing activities Proceeds from line of credit 378, ,000 Repayment of line of credit (378,000) (342,000) Repayment of mortgage loan (18,183) (16,488) Net cash used by investing activities (18,183) (16,488) Net change in cash and cash equivalents (54,512) 300,692 Cash and cash equivalents, beginning of year 397,267 96,575 Cash and cash equivalents, end of year $ 342,755 $ 397,267 Supplemental disclosure of cash flow information Cash paid for interest $ 14,736 $ 16,935 Income taxes paid $ - $ - The accompanying independent auditor's report and notes are an integral part of the financial statements. 6

10 1. Organization and purpose Founded in 1997, Byte Back, Inc. s (Byte Back) mission is to improve economic opportunity for lowincome residents of the Washington, DC area by providing computer training and employment readiness skills. Byte Back offers a wide range of computer training, from basic computer literacy to Information Technology (IT) certification courses; as well as job readiness skills and job placement assistance. Most instructors are volunteers. Low-income students receive free instruction and a free refurbished computer upon graduation. During fiscal year 2015, Byte Back had over 1,247 enrollments in classes and workshops held at 18 locations in the Washington DC area. Byte Back opened a new location, the Technology Academy, greatly expanding the depth and breadth of programs leading to industryrecognized IT certifications. The average hourly wage of certification students who obtained employment was $15.25 for fiscal year Byte Back was one of five finalists and won Honorable Mention for the Washington Post Award for Excellence in Nonprofit Management in both 2010 and 2012 and was selected for inclusion in the and Catalogue for Philanthropy. Byte Back s revenue includes contributions and grants, government contract revenue, program-related sales and fees, special event revenue, investment income and donated services and materials. 2. Significant accounting policies Basis of accounting The financial statements of Byte Back are prepared using the accrual method of accounting. In accordance with this method of accounting, revenue is recognized in the period in which it is earned and expenses are recognized in the period in which they are incurred. All revenue and expenses which are applicable to future periods have been presented as deferred revenue or prepaid expenses on the accompanying statements of financial position. Financial statement presentation Byte Back is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. At, Byte Back had no permanently restricted net assets. Use of estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 7

11 2. Summary of significant accounting policies (continued) Cash and cash equivalents For purposes of the statements of cash flows, Byte Back considers all cash and unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents. It is Byte Back s policy not to classify certificates of deposit as cash and cash equivalents. Federal Deposit Insurance Corporation (FDIC) insurance is $250,000 per depositor, per insured bank. As of June 30, 2015 the uninsured bank balance amounted to $3,591. As of June 30, 2014, there was no uninsured bank balance. Allowance for uncollectible grants, contracts and pledges receivable Byte Back considers the need for an allowance for uncollectible grants, contracts and pledges receivable based on a review of balances and historical collection experience. Management has provided for potential uncollectible amounts through an allowance of $31,327 and $34,808 for pledges receivable as of, respectively. Investments Investments are measured at fair value in the statement of financial position based on publicly available market data obtained from services independent of Byte Back. Investment income or loss (including gains and losses on investments, interest, and dividends) is included in the statement of activities as increases or decreases in unrestricted net assets unless the income or loss is restricted by donor or law. Inventory Through its First Time Technology program, Byte Back maintains an inventory of computer parts and recycled computers for its graduates. Management records the inventory balance internally. The balance is not reflected here, as it would not be material to these financial statements. Property and equipment Property and equipment is recorded at cost if purchased and at fair value if donated. Byte back capitalizes all expenditures for property and equipment in excess of $500 with a useful life in excess of one year or more. Depreciation is computed using the straight-line method. Compensated absences Employees of Byte Back are entitled to paid vacation depending on job classification, length of service and other factors. As of, estimated compensated absences of $9,940 and $12,093, respectively are included in accounts payable and accrued expenses in the accompanying statements of financial position. 8

12 2. Summary of significant accounting policies (continued) Contributions and promises to give Contributions received and unconditional promises to give are measured at their fair values and are reported as an increase in net assets. Byte back reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets, or if they are designated as support for future periods. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Donor-restricted contributions whose restrictions are met in the same reporting period are reported as unrestricted support. It is the policy of Byte Back to include the long term portion of pledges receivable as temporarily restricted net assets. Revenue recognition Grant awards received by Byte Back are evaluated on an individual basis, based on grant specifications to determine appropriate recognition as either a contribution or cost reimbursement grant. Grants recorded as contributions are recognized as revenue in the year awarded. For grants determined to be cost reimbursement awards, grant revenue is recognized as costs are incurred and funds received in excess of costs incurred are recorded as deferred revenue In-kind contributions A substantial number of volunteers donate time to Byte Back's program services. Certain donated services are reflected in the financial statements because the services require specialized skills as defined by U.S. generally accepted accounting principles and are an integral part of Byte Back's purpose. Donated property is reflected as a revenue and asset at the fair market value of the property on date of donation. In-kind support is detailed in Note 7 of these financial statements. Functional classification of expenses The costs of providing the programs and services are summarized on a functional basis in the accompanying financial statements. Accordingly, certain costs have been allocated among the programs and services benefited. Expenses have been allocated between the program services, general and administrative, and fundraising functions based on labor hours of employees and use of office space. Fair value of financial assets and liabilities Financial assets with carrying values approximating fair value include cash and cash equivalents, grants and contracts receivable, pledges receivable, deposits and prepaid expenses. Financial liabilities with carrying values approximating fair value include accounts payable and accrued expenses. The carrying value of these financial assets and liabilities approximates fair value due to their short maturities and any associated interest rates approximate current market rates. 9

13 2. Summary of significant accounting policies (continued) Income taxes Byte Back, Inc. is exempt from federal income tax as a nonprofit organization described in Section 501(c) (3) of the Internal Revenue Code and is classified as an organization other than a private foundation. The Organization did not have a liability for unrelated business income for the years ended. The material jurisdictions subject to potential examination by taxing authorities include the U.S. and the District of Columbia. Management does not believe that the ultimate outcome of any future examinations of open tax years will have a material impact on the Organization s results of operations. Tax years that remain subject to examination by the IRS are for the fiscal years ended June 30, 2012 through Reclassifications Certain amounts reported in prior years are reclassified to conform to the current year presentation. 3. Cash and cash equivalents Cash and cash equivalents for consisted of the following: Checking $ 89,163 $ 147,260 Board designated - money market 253, ,007 $ 342,754 $ 397,267 Outstanding checks $ 10,976 $ 9,684 Deposits in transit (16,335) - Bank balance $ 337,395 $ 406,951 Covered by the Federal Deposit Insurance Corporation (FDIC) $ 333,642 $ 252,500 10

14 4. Pledges receivable During the years ended, Byte Back held a special event designed for donors to pledge amounts collectible over the next five years. Pledges have been discounted at 2% to record the present value of the pledges to be received as of. The following is a summary of pledges receivable as of June 30, Pledges due in Less than one year $ 31,514 $ 38,338 One to five years 159, , , ,517 Allowance for doubtful pledges (31,327) (34,808) Present value discount (11,394) (12,502) 148, ,207 Less: current portion (31,514) (38,338) Long-term portion $ 117,029 $ 126, Grants and contracts receivable Grants and contracts receivable consisted of the following as of June 30, Insurance proceeds receivable $ 50,000 $ - Grants receivable Foundations 105, ,984 Government grants and contracts Serve DC/Corporation for National and Community Service 32,035 26,024 D.C. Public Library 33,300 38,431 D.C. Department of Employment Services - 20,674 Department of Human Services 154,500 D. C. Office of the Chief Technology Officer 33,033 - D.C. Office on Latino Affairs 10,000 12,500 D.C. Office of the State Superintendent for Education 29,536 77,608 $ 447,504 $ 279,221 11

15 5. Grants and contracts receivable (continued) Grants receivable include amounts due from donors and contracts receivable include amounts due from federal and District of Columbia sources for computer training services. All amounts are considered fully collectible by management and are due within one year. 6. Property and equipment Property and equipment at consisted of the following: 2015 Accumulated Depreciation Useful Cost depreciation expense life Building $ 234,316 $ 96,940 $ 6, years Building renovations 35,310 14,761 2, years Furniture and equipment 305, ,301 37, years Vehicles 37,107 4,329 4,329 5 years Total $ 611,977 $ 339,331 $ 50,263 Cost Accumulated depreciation 2014 Depreciation expense Useful life Building $ 234,316 $ 90,932 $ 6, years Building renovations 35,310 12,407 2, years Furniture and equipment 279, ,937 33, years Total $ 549,019 $ 292,276 $ 42, In-kind contributions Byte Back receives contributions of software, professional services and time from volunteer teachers who provide computer training to participants of the organization s programs. Such contributions are valued at fair market value at the time of receipt. Teacher hours are valued between $15 and $60 per hour, depending on the course level taught. Donated services for the year ended June 30, 2015 include strategic planning services, temporary services and legal fees. Donated services for the year ended June 30, 2014 include strategic planning services and temporary services. 12

16 7. In-kind contributions (continued) Donated services and materials for the years ended included the following: Donated services and labor Classroom teachers, including Americorps volunteers $ 268,416 $ 365,722 Repairs 49,400 - Legal services 25,234 - Other professional services 2,357 6,258 Donated assets - 7,340 Donated materials and supplies 18,074 93,596 Total $ 363,481 $ 472,916 In-kind materials are recorded as revenue and expensed as incurred and classified as a program services, general and administrative, or fundraising. Donated materials consisted primarily of computers, equipment, and software donated to Byte Back s First Time Technology program during the year ended June 30, Donated materials consisted primarily of furniture for Byte Back s Technology Academy location and computers donated to Byte Back s First Time Technology program during the year ended June 30, A substantial number of additional volunteers donate time to Byte Back's program services. These donated services are not reflected in the financial statements as the services do not require specialized skills as defined by U.S. generally accepted accounting principles. 13

17 8. Temporarily restricted net assets Temporarily restricted net assets consisted of the following as of June 30, 2015: 2014 Additions Releases 2015 Restricted for future periods Cafritz Foundation $ - $ 17,500 $ - $ 17,500 Harry and Jeanette Weinberg Foundation 30,000-30,000 - Meyer Foundation 50,000-50,000 - Long term pledges receivable 126,869 23,525 33, ,029 Restricted for programs 901 Monroe Development 18,037-18,037 - International Monetary Fund - 12,600-12,600 Joshua Fund - 12,725-12,725 Mayor's Office on Latino Affairs 6,283 25,000 26,952 4,331 National Home Library 1,500-1,500 - United Way 5,000-5,000 - William S. Abel Foundation 21,202-21,202 - Starbucks Memorial Fund - 25,000-25,000 SUPAU Trust 1,145-1,145 - The City Fund - 100,000 62,690 37,310 $ 260,036 $ 216,350 $ 249,891 $ 226,495 14

18 8. Temporarily restricted net assets (continued) Temporarily restricted net assets consisted of the following as of June 30, 2014: 2013 Additions Releases 2014 Restricted for future periods Cafritz Foundation $ 16,250 $ - $ 16,250 $ - Comcast Foundation 7,500-7,500 - AARP Foundation 38,545-38,545 - Share Fund 10,000-10,000 - Jones Foundation 17,143-17,143 - United Way 10,000-10,000 - Harry and Jeanette Weinberg Foundation - 30,000-30,000 Meyer Foundation - 50,000-50,000 Long term pledges receivable 138,427 36,429 47, ,869 Restricted for programs 901 Monroe Development 18, ,037 National Home Library - 1,500-1,500 United Way - 10,000 5,000 5,000 William S. Abel Foundation - 25,000 3,798 21,202 SUPAU Trust - 3,000 1,855 1,145 Mayor's Office on Latino Affairs 3,360 25,000 22,077 6,283 $ 259,262 $ 180,929 $ 180,155 $ 260, Mortgage loan payable Byte Back has a mortgage loan secured by land and its office building. In August 2014, the interest rate was reduced from 7.61% to 6.25% and the monthly installment changed from $2,631 to $2,503. As of, the principal amount of the mortgage loan payable was $169,702 and $187,885, respectively. The full principal balance and all unpaid accrued interest, if any, is due and payable in full on June 26,

19 9. Mortgage loan payable (continued) The future minimum principal payments on the mortgage loan are as follows as of June 30: 2016 $ 20, , , , ,727 Thereafter 54,915 Total $ 169, Line of credit In January 2012, Byte Back obtained a line of credit for $100,000 that was secured by the land and its office building with a 4.75% interest rate. In August 2014, the line of credit was increased to $300,000, with a maturity date of August 6, Interest is applied at the annual rate of 4.75% and payments are required monthly. No amounts were outstanding as of. 11. Commitments Byte Back leases additional office space for operations, classroom locations and for its First Time Technology program. Lease terms are typically one year and are renewed as needed and monthly lease payments range from $975 to $3,605 per month per property. Rental expense for the years ended was $86,173 and $67,361, respectively and is included with occupancy and utility expense on the accompanying statements of functional expenses. Future minimum lease payments are $78,033 and $9,069 for the years ending June 30, 2016 and 2017, respectively. 12. Board designated net assets During the fiscal year ended June 30, 2012, Byte Back established an operating reserve fund for board designated net assets. The purpose of the fund is to provide an internal source of resources with a target minimum of six months of average operating costs. The balance in the fund was $253,591 and $250,007 as of, respectively. 16

20 13. Reclassification Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported change in net assets. 14. Subsequent events Byte Back assessed events occurring subsequent to June 30, 2015 through December 15, 2015, the date the financial statements were available to be issued, for potential recognition and disclosure in the financial statements. No events have occurred that would require adjustment to or disclosure in the financial statements. 17